Nintendo 1Q earnings expected to disappoint

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    TOKYO (AP) — Nintendo’s earnings for the April-June quarter are likely to be lackluster, underscoring how sharply the company’s fortunes have turned since the days when the Wii seemed to be an unstoppable retail force. The Japanese video game and console maker reports results on Thursday.

    OVERVIEW: Facing waning consumer demand for its products, Nintendo was banking on a new 3-D version of its DS handheld device to spur sales and gaming buzz. The 3DS got off to a solid start when it launched earlier this year but has since lost momentum. Analysts cite a lack of compelling content for the device and say consumers may now be waiting for Sony Corp.’s upcoming release of the new PlayStation Vita handheld.

    The Kyoto-based company also faces increased competition from smartphones and social games, particularly among the casual gamers it targeted with the Wii. At a recent general shareholders meeting, President Satoru Iwata told investors Nintendo would not compete directly with smartphones by adding extra functions to the 3DS.

    “We have to think about how we can make consumers feel that, even if they have smartphones, they still want to carry around the Nintendo 3DS with them,” Iwata said.

    A strong yen is adding to the company’s woes. About 80 percent of Nintendo’s sales are from outside of Japan, making it vulnerable to currency fluctuations. Nintendo based its earnings forecasts this year on a rate of 83 yen to the dollar. The dollar has recently hovered around 80 yen to the dollar.

    BY THE NUMBERS: For the fiscal year ending March 2012, Nintendo is forecasting sales to rise 8.4 percent to 1.1 trillion yen ($14 billion) and net profit to climb 42 percent to 110 billion yen ($1.4 billion). It expects to move 16 million 3DS machines this fiscal year. It expects Wii sales to drop 14 percent to 13 million units this year.

    STOCK PERFORMANCE: Investors have punished Nintendo’s stock price, reflecting their anxiety about the company’s outlook. The issue has plunged 40 percent this year compared with a relatively flat performance by the benchmark Nikkei 225 stock average.

    ANALYST TAKE: Haruka Mori, a technology analyst at Barclays Capital in Tokyo, is bearish on Nintendo. He expects the company to post a 11.9 billion net loss in the April-June quarter and miss their full-year targets.

    “It is not only the 3DS that is struggling at present,” Mori said in a report earlier this month. “Sales of the legacy DS and the Wii — which has been discounted in Europe and the US — appear to be below plan.”

    Mori also noted difficulties in judging the potential of Nintendo’s new Wii U, which was unveiled in June but failed to impress investors. The device, expected to go sale next year, features a motion-sensing controller with a tablet-like touch screen and high-definition graphics.

    “We expect concerns about the product to dominate ahead of the release of further details” such as price, Mori said.